By Saket Sundria and Alex Longley
Any recovery in crude is expected to be uneven, with Barclays Plc predicting the market has already seen the fastest improvement in demand and steepest drop in supply, and Goldman Sachs Group Inc. turning bearish due to poor returns from refining. While Treasury Secretary Steven Mnuchin said the U.S. shouldn’t shut down the economy again even if there is another jump in coronavirus cases, more than 2 million Americans have now been infected.
“The past 24 hours have highlighted the perils of underestimating the economic fallout of the Covid-19 pandemic and the threat of fresh lockdowns,” said PVM Oil Associates analyst Stephen Brennock. “This isn’t the first and won’t be the last time that markets are guilty of complacency.”
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Optimism at the start of the week over the agreement by the Organization of Petroleum Exporting Countries and its allies to extend curbs by a month quickly diminished after Saudi Arabia said it would cease extra voluntary cuts at the end of June. The deal even secured commitments from laggards such as Iraq and Nigeria after they were called out for their non-compliance.
One of the largest exchange-traded funds in the oil market also saw a record outflow Thursday, likely adding to the pressure on crude. WisdomTree’s WTI Crude Oil ETF had a little over $128 million worth of outflows, according to filings.
The market must now look to gasoline to drive the recovery in demand, according to Mercuria Energy Group Ltd. Global crude consumption will return to about 95 million barrels a day by December, the trading house’s Chief Executive Officer Marco Dunand said in an interview Thursday.
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Canadians Should Decide What to do With Their Money – Not Politicians and Bureaucrats